Should we panic? Well, according to a new report by the Pew Center on the States, 61 cities face a collective fiscal retirement burden of more than $210 billion, in part because consistent underfunding of benefits leaves yawning gaps in long-term cost projections. The report surveyed all U.S. cities with populations over 500,000, along with the most populous city in each state. Some cities are doing better than others in maintaining funds, but gaps persist, according to Pew’s estimates for fiscal years 2007-2010, especially in municipalities where local governments have lacked the “fiscal discipline” to keep up pension fund contributions -- a situation exacerbated by the Great Recession.

Sometimes, politicians frame cost-cutting proposals as if “generous” benefits themselves are the problem, as opposed to officials failing to uphold the commitments they've made to civil servants.

In New Jersey, brazenly conservative Governor Chris Christie has pushed through short-term austerity measures that ostensibly shore up pensions by shifting costs onto beneficiaries, increasing employee contributions and freezing vital cost-of-living adjustments. But the long-term liabilities remained unresolved. Shortly after Christie trumpeted his pension fix, the New Jersey Star Ledger noted that liabilities would spike again after the stopgap measures petered out, warning, “because the state won’t be making full pension payments, the gap will swell again to $58 billion by 2019, according to the state’s estimates.”

While such fixes may be temporary, they threaten to bring lasting pain for labor. After lawmakers approved benefit reform legislation in 2011, the Communications Workers of America blasted the plan as “anti-worker and anti-union” because it not only attacked benefits, but contained provisions that eroded unions' collective bargaining rights, potentially undermining their leverage in future contract talks.

Proposals by far-right groups such as Americans for Tax Reform, however, make Christie's scheme look modest. Some pension alarmists have put a nuclear option on the table. Delicately ignoring the global chaos unleashed by financial markets in recent years, conservative groups have seized precisely this moment of crisis to push for more dependence on the “free market” as a fix for troubled public benefits systems.

In Louisiana, pension troubles have prompted Governor Bobby Jindal to move toward dismantling altogether defined-benefit pensions (which provide stable long-term income in retirement) in favor of a more unstable, market-oriented system of 401(k)-type benefits. According to one actuarial analysis by the Louisiana State Employees Retirement System, this reform could backfire on both public workers and the state, because eligibility restrictions would make the plan fail to meet a “Social Security equivalency test.” Since the current system of benefits effectively serves as a replacement for Social Security, a new scheme that falls short of that could ultimately heap extra costs on the state.

Other states, including California, along with some cities, have explored or implemented 401(k)-style restructuring schemes to replace traditional pensions.

The Pew report does not explicitly endorse 401(k)-type plans as a blanket solution but flags it as one potential reform idea. At the same time, Pew researchers point out that healthcare costs, not pensions, could pose an even larger fiscal burden. That healthcare funding “cliff” raises a broader debate about the role of the state and employers (which are one and the same in the case of civil servants) in providing for workers’ and retirees’ health.

The bottom line is that pension reform can be a political Trojan horse. The reaction to pension crunches reflects political priorities that are often hostile to workers. Across the country, governments have opted to protect their financial commitments to bondholders on at the expense of their commitments to future retirees and unions, who have seen benefits frozen or sharply cut.

More reasonable analyses by progressive economists show that public-sector benefits tend to offset relatively low wages, so the overall compensation package is fair and by no means lavish, as right-wingers like Christie suggest.

Monique Morrissey, an economist at the labor-oriented Economic Policy Institute, takes a different approach than anti-government politicians. In some cases, she acknowledges, state budget problems may require cuts or force renegotiations in benefit plans. But in her opinion, completely abandoning defined-benefit pensions (which are, on balance, a good value for workers) is pennywise and pound foolish. "With very few exceptions, all of the cities and states where there are severe problems, it's because the politicians for many years have neglected to make the pension payments. And this really doesn't have much to do with the pensions or the public sector workers,” she tells Working In These Times. “It doesn't reflect the pensions being too lavish or being expensive or being unaffordable or anything to do with that. What it reflects is simply that this is one way of getting around balanced budget rules. And certainly some of these cities that are flagged as having problems are chronic offenders."

Instead of dismantling public sector benefits, local governments might address budget deficits by, say, making the tax system more progressive. As with many of the cries of “crisis” coming from the right, the obsession over public pension “unsustainability” too often takes a real problem of governments failing to uphold public promises and spins it into a false problem of workers supposedly demanding too much.

Michelle Chen is a contributing editor at In These Times, a contributor to Working In These Times, and an editor at CultureStrike. She is also a co-producer of Asia Pacific Forum on Pacifica's WBAI. Her work has appeared on Alternet, Colorlines.com, Ms., and The Nation, Newsday, and her old zine, cain. Follow her on Twitter at @meeshellchen or reach her at michellechen [at] inthesetimes [dot] com.

@outback71. Wrong. The pensions are broke because the politicians intentionally broke them. Republican Governor Christie Whitman jumped on a fully funded state pensions to give "pension holidays" lasting five years to the state and its cities. The lost revenues were never recovered and subsequent cynical politicians (ie. Republican Governor Chris Christie) now claim that public pensions are unsustainable. However, continued tax giveaways to corporations and the rich are oh-so necessary and sustainable. The rich and the wealthy bondholders come before workers.

Posted by ddg37 on 2013-01-27 15:27:46

The big boys in governmnet are just using you to protect their own padded pensions..... check out this bit of greed from Pennsylvania

Sorry, in this case it really is a spending problem. When the stock market boomed in the 90s, many public pension funds suddenly found themselves 100-150% funded. Rather than say 'well, we should hoard these gains for a rainy day', states (pushed by AFSCME and Teachers Unions) pushed for lavish benefit increases. Since then growth has been flat with the resulting pension abyss. Now taxpayers are on the hook for the difference. Wait till you see what happens when senior citizens are forced to pay 30-40-50% higher property taxes in order to pay for retired teachers.....it won't be pretty. Wait till you see what happens when we have to layoff young teachers in order to pay old teachers not to work....it wont be pretty.

Posted by outback71 on 2013-01-25 10:12:52

Well, as one of those civil servants who has thus far "managed to hold onto a modicum of retirement security," I can only say that the scapegoating of people like me is scary in its mean-spiritness. My income, the pension I earned as a low level administrative assistant is hardly lavish. My father, a law enforcement professional who worked for the IRS, had an amazing pension indexed to the cost of living, so he ended up being able to retire at age 50 and live for 40 years more on a pension that paid him more per month than he was getting when he was employed,.

I get it that the private enterprise folks who don't get pensions and have been swindled into the 401K racket, tied to the stock market, think people like me have an unfair to them sweetheart deal. But I paid into it. The government i worked fie put in matching funds except during the many budget crises when we would be " required" to "pick up" our retirement, necessitating a cut of several hundred dollars a month right off the top of my take home pay.

Now I have to fret about being pushed into total poverty by this scapegoating of people like me, elderly but without debt. Our pension funds are as dependent on the stock market as anyone's 401K. All I want is to live out my days with Social Security and the modest pension I feel that I paid into and earned.

Posted by Contrarian on 2013-01-24 21:21:23

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